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(c) 1988 Los Angeles Times, March 13, 1988

"The guy is someone who likes to buy power, and he's willing to spread his money around," said Korrick, a stockbroker in suburban Scottsdale.

Keating headed west to Phoenix in 1976 to head a troubled home-building firm that was owned by wealthy Cincinnati financier Carl Lindner. Keating was a vice president and director of Lindner's American Financial Corp.

Keating and Lindner eventually parted ways after Lindner "took his company private, Keating said. "I realized there was no place for me in a private company.⚫

In 1979, both Lindner and Keating consented to a Securities and Exchange Commission order enjoining them from fraudulently diverting corporate assets to their personal use. They neither admitted nor denied the charges.

The case stemmed from SEC charges that the two men had allowed a bank controlled by American Financial to make $14 million in improper loans to officers of the company, their families and others. Keating still resents the SEC action, saying that it cost him a chance several years ago to be ambassador to the Bahamas, where he has a home.

A lawyer himself, Keating uses a large staff of in-house attorneys, as well as numerous outside firms, to carry on his legal battles.

One notable dispute came in 1985, when Dallas-based Gulf Broadcasting accused Keating and his companies in a civil suit of illegally acquiring Gulf's stock and then attempting to force Gulf to buy back the shares far above the market price, a practice commonly called greenmail. At the time, American Continental was a large shareholder in Gulf.

At the heart of the lawsuit was an allegation that Keating had offered Gulf's chairman "many millions of dollars and a generous price for his Gulf stock if he would resign and turn control of Gulf" over to Keating. The lawsuit also accused Keating of illegally concealing his troubles with the SEC when he and his companies bought the Gulf stock.

After the case was settled amicably, Keating received a letter from Gulf President John H. Massey apologizing for the personal nature of the dispute. Massey blamed press reports for distorting the differences. Taft Broadcasting eventually bought Gulf.

The press also gets its share of heat from Keating.

In one case, an American Continental affiliate sued the Mesa Tribune and its executive editor, Max Jennings, over an opinion piece by Jennings that condemned a controversial zoning decision by the Mesa City Council.

Jennings criticized the city council for approving a huge Keating residential development project that was to be built right under "the screaming jets" of a nearby Air Force base.

Jennings actually had little critical to say about Ancor, the American Continental affliate. "The only winner I can see in this sorry affair," he concluded, "is Amcor Investment Co., which is certainly doing what it should be - saking money."

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(c) 1988 Los Angeles Times, March 13, 1988

Amcor sued nonetheless, saying that the article implied that the housing development, known as "the Crossings," would be a "hapless, unwholesome, unhealthful, and dangerous place in which to live."

The suit also said the column threw a wrench into Amcar's plan to sell an interest in the project to other investors. A local judge dismissed the suit, but Amcor has appealed.

Keating's love of battle and his conservative views have made him a leading crusader against pornography, an interest that dates back to the 1950s, when he led a drive to rid Cincinnati newstands of sexually explicit material. He still helps finance an anti-pornography group known as the Citizens for Decency Through Law, whose offices are adjacent to American Continental's on Camelback Road here.

Over the years, Keating and his followers have battled foes varying from Larry Flynt, the publisher of Hustler magazine, to Pacific Bell, the latter for allowing indiscriminate access to dial-a-porn messages.

A continuing skirmish involves an adult movie theater in an Orange County shopping center that Lincoln Savings sued last April after the failure of a long effort by the city of Santa Ana to close the theater.

Operated by Mitchell Bros., the theater has attracted "criminal elements, organized crime and persons who practice sexual deviations, such as homosexuals, lesbians, voyeurs, prostitutes, pedophiliacs, sadists, masochists, rapists, etc., into the area," the suit charged.

Although Lincoln claimed that the theater creates a threat to the safety of employees at one of its nearby branches, the movie theater is, in fact, inconspicuously tucked away in a corner of a shopping center several blocks from the bank branch.

Mitchell Bros. characterized Lincoln Savings as a "wealthy and powerful Arizona-based financial institution ... owned by political extremists" that is trying to censor what movies people in Orange County may watch.

Keating's moral views have also played a role at Estrella, the American Continental development that is intended to eventually house 200,000 people on 20,000 acres of land on the western edge of Phoenix.

In a court filing known as a "declaration of covenants, conditions and restrictions, American Continental gave Estrella's board of directors the power to remove anything from a private piece of property that it considers obscene. The declaration also sought to prevent anyone living at Estrella from "intentionally termininating a human pregnancy."

After the restrictions were disclosed by the Arizona Republic newspaper, Keating changed the controversial stipulations, saying that they were a "mistake" and had been proposed without his knowledge by an overzealous staff. Keating's son is responsible for the development of Estrella.

Those who know Keating best say his social views are fired by deep religious beliefs. Keating has, for example, donated well over $1 million to the Covenant House, a shelter in New York City for troubled teen-agers.

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(c) 1988 Los Angeles Times, March 13, 1988

Lincoln Savings has also loaned Covenant House more than $40 million to buy buildings in Manhattan. "He makes you believe in Providence," said a grateful Father Bruce Ritter, the Franciscan priest who founded the organization and has expanded it to cities throughout the country.

When Mother Teresa came to the United States recently, it was American Continental's helicopter that transported the famous Roman Catholic nun to remote Indian reservations in the Southwest.

"He said he wanted to be damn sure he gets to heaven," said Pat Murphy, publisher of the Arizona Republic, adding: "I'm not sure he said that facetiously."

Replied Keating: "I'll take any way to heaven I can."

GRAPHIC: Photo, Charles Keating is a developer who fights battles on many fronts. RANDY LEFFINGWELL / Los Angeles Times

TYPE:

Profile

SUBJECT:

KEATING, CHARLES H JR; ENTREPRENEURS; BUSINESSMEN; LINCOLN SAVINGS & LOAN
ASSOCIATION; CONSERVATIVES; GOVERNMENT RÉGULATION; BUSINESS ETHICS; BANKING
INDUSTRY ORANGE COUNTY; SAVINGS AND LOANS; AMERICAN CONTINENTAL CORP

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970315-0002.

Bank Board Appointee Has Close Ties
To Thrift with Controversial in.estment

--

By Cavid 5. Miller and John E. Yang

Staff Reporters of The Wall Street Journal 12/18/86

WALL STREET JOURNAL (J)

GOUMT

BANKS, THRIFT INSTITUTIONS (6NK)

Even for the industry-oriented Federal Home Loan Bank Board, real estate developer Lee H. Henkel Jr. seems an unusually avid booster of the thrift industry he's just been appointed to help regulate.

"It's been real good to me in helping me make money," Mr. Henkel said of the industry in a recent talk to thrift executives in Los Angeles. "I'm your cheerleader. I'm your spokesman. I'm not going to give away your industry to the FOIC (Federal Deposit Insurance Corp.) or the banks."

-

It's no secret that the former Atlanta tax lawyer favors
less regulation of the savings and loan industry unlike
embattled board chairman Edwin J. Gray and many of the
nation's larger, established thrifts. And Mr. Henkel has said
he's bothered philosophically by a soon-to-expire rule that
bars federally insured thrifts from investing more than 10%
of their assets directly in real estate or stocks.

What have been less noted as the Bank Board meets today to
consider Mr. Gray's proposed two-year extension of the
so-called direct investment rule are the scope and closeness
of Mr. Henkel's business dealings with a California thrift
controlled by one of the most outspoken critics of the
regulation, Charles H. Keating Jr. Mr. Keating controls the
parent of Irvine-based Lincoln Savings & Loan Association,
which has about 20% of its $3.87 billion in assets in direct
investments and has been rebuffed by the Bank Board in all
its efforts to make new direct investments over the past two
years.

A search of deed records in four counties in the Atlanta
area shows that Lincoln Savings has made at least $61.9
million in loans to corporations and partnerships in which
Mr. Henkel had an interest. The records indicate that Lincoln
was by far the largest single source of financing for a
closely held real estate development company of which Mr.
Henkel was chairman, a shareholder and one of three
directors.

To be sure, the 58-year-old Mr. Henkel isn't the first
Bank Board member with previous ties to the thrift industry.
Mr. Gray is a former executive of a big California thrift and
is being investigated for accepting expense reimbursements
from thrift industry organziations while chairman of the Bank
Board. Few board members, however, are known to have had
financial dealings as large as Mr. Henkel's with a thrift
that has taken such an aggressive position on a controversial
regulatory issue.

Mr. Henkel, who still faces Senate confirmation hearings
after appointment to the Bank Board during a recess, sees no
problems with his past business dealings with Mr. Keating.
Mr. Henkel declines to comment on the details of his real
estate development activities, but says that he has put all
his business interests that had dealings with thrifts --
including those with loans from Lincoln -- into a blind
trust. He also intends to recuse himself from Bank Board
votes that specifically affect thrifts he dealt with,

SPECIAL COUNSEL
EX. 514

But Mr. Henkel says he won't recuse himself from policy votes on issues such as the proposed extension of the direct investment rule, even if Lincoln or other thrifts he has dealt with have a significant interest in the outcome. "On matters of policy, it is permissible for me lu yo airead and exercise my judgment, Mr. Henkel said in an interview. "I intend to be rigidly independent," he said of his role on the three-member Bank Board.

Questions about Mr. Henkel's close ties to Mr. Keating are likely to be raised when he faces the Senate Banking Committee during confirmation hearings early next year. Sen. William Proxmire (D. Wis.), who will become chairman of the Senate Banking Committee, says that Mr. Henkel's "close relationship with Mr. Keating "would disqualify him in my mind as a board member.

Mr. Henkel has declined to say how he will vote if the direct investment rule comes to a vote today. He did tell .thrift executives in Dallas last week that he believes a vote on any long-term extension of the rule currently scheduled to expire Dec. 31 -- should be delayed until after a public hearing can be held.

END OF DOCUMENT

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